A major goal of embryogenesis is the establishment of body form. To accomplish this, each cell must differentiate appropriately for its position. Several questions about "positional information" arise. How is it generated? Of what is it constituted? How is it read accurately by each cell? And, once read, how do cells execute commands to differentiate properly? For all their complexity, these issues have become tractable as a consequence of molecular genetic analysis of embryogenesis in the fruit fly. This proposal addresses the nature of positional information and how specific cells read that information. At the cellular blastoderm in embryogenesis, pair-rule proteins cooperate to activate the expression of identity-determining genes in specific cells. In this manner some cells are given their positional identities directly. The genes specifying identity are members of the segment polarity gene class. Subsequently, other cells have their identities established by virtue of cell communication circuits that are controlled by the segment polarity genes. The pair-rule gene oddpaired plays a central role in activating three segment polarity genes, wingless, engrailed and gooseberry, each of which has distinct roles in cell patterning. This proposal addresses the mechanism by which oddpaired activates these cell patterning genes. The mechanisms revealed by these studies are likely to be at work in other organisms where cellular interactions and inductive events predominate during development.